Illusory Follies Andrew Flanagan's Blog

11Dec/084

Pricing?

I was annoyed by a recent post to Slashdot. It references an article that makes the claim that the iTunes App Store (which sells applications for the iPhone and iPod touch) is hurting developers because of the pricing model that's allowed. Basically, the pricing model is open. Applications must be approved before Apple will list them but you can price them between $.99 and $999.99 (or they can be free). Developer's are apparently whining that with the availability of cheap (usually $.99 applications) it's hard to support serious development.

Stack of Money by Dani SimmondsThe request is that Apple "do something" to fix this.

This is bizarre. The claim is that because so many free or cheap applications have flooded the market, no one can compete. The analysis looks at cost to bring an iPhone application to market and the expected sales depending on its price.

Maybe the problem is simply that iPhone users aren't willing to drop as much money as developers would like. Maybe the current glut of free and cheap apps is a poor anticipation of actual demand by the developers. Some developers made free apps, sold the idea and hooked users and then migrated to $1 or $5 applications. These developers are making SOME money. Maybe not a lot, and maybe the iTunes App Store will never be a lucrative business for developers (although Apple seems to be doing quite well).

The success that small programming outfits have had is that they can leverage a nice API to work with that users can use in novel ways. At $1, many users are willing to buy without recognizing a brand name or being suspicious of a poorly made product. For independent software developers, this is probably enough to pay the bills. For larger products, the source of income is likely to be in the form of some integrated service (free iPhone application that interfaces with a $40 desktop application).

I don't see the dilemma. Isn't this what the free market is all about? If customers aren't willing to pay $20 for most applications for the iPhone, maybe developers shouldn't make them. On the other hand, if developers really can make a much more complex product with almost universal appeal, then even pricing it at $1 or $5, it will almost surely pay for the higher development costs. This is the way the world works.

Comments (4) Trackbacks (0)
  1. Nice to see that other people had the same reaction I did when I read the article.

  2. I agree with your comments, but one point where I agree with the article (being an iPhone user) is that there should be a trial model. I have gotten to the point where I am not even wasting the measly buck on an app unless the ratings are really good as I have gotten so many bad apps. .99 cents may seem paltry, but when there are 10 similar apps, each for .99 or 1.99 and you have to buy all of them to get the one you like, the only one that wins is Apple.

  3. In reply to CoderGuy

    A trial may work but there are other freemarket alternatives.

    1. Trial&Error – if you get burnt once are you going to try the vendor again? (If so, that may indicate either that the value lost wasn’t significant or that there’s this bridge you might be interested in.) If you got a great deal, might you not try again even at a higher price (the loss leader approach. Which begins to make sense to both buyer and seller.
    2.Product as Advertisement – often the best way to make a name for yourself in a highly competitive marketplace is to demonstrate your ability – getting practically nothing for a first product is just such an example. If you priced it at nothing then too many people would “buy” but if you put some minimal price then you weed out those who have no real interest (you are in a sense buying a contact list of people who have at least some real interest in your product(I assume the seller is notified of the buyer and provided some point of contact??). The buyer also is getting a list of reputable sellers which he can trust. Such information has great value in highly competitive markets.

    Time precludes further examples – but clearly Apple does not need to be the only winner.

  4. Every time i come here I am not dissapointed, nice post


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